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Financial Plan
Financial Plan 1.1 'The Assumptions of CVP analysis in the case of The Brooklyn Revolution There are a number of assumptions under which CVP operates. The assumptions which have an effect on the outcome of the analysis of The Brooklyn Revolution are as follows: · Selling price is constant. The price of a product or service will not change as volume changes. There will however be special meal deals which change seasonally or more regularly to benefit the profit margin. · Costs can be easily divided into variable and fixed fractions, with the variable cost being constant per unit, and the fixed costs being constant in total. This however may now be the case as a higher sales volume can allow for bulk discounts on the variable costs such as food. · Inventories do not change. The number of units produced equals the number of units sold. While we plan to cut down on incidental stock loss, it is impossible for the Brooklyn Revolution to guarantee no wastage. 1.2 'Research and Justification of the capital/set up costs and working capital associated with the project. Set up costs and working capital includes in €: Alcohol Stock 2,000 First three months wages 12,174 Fixtures and fittings 50,000 Renovation Costs 100,000 General Expenses 2,000 Total 166,174 Alcohol stock is to begin initially at €2,000. This will stabilise and be maintained at a level of €4,000 which is in keeping with a bar of this size. This figure is based on advice from the manager of The Winter Garden bar and grill in the Red Cow. Wages were calculated based on an average wage of €9 per hour for twelve staff, six of whom are full time, working an average of 37.5 hours a week. The remaining six are part time and are estimated to be working an average of fifteen hours per week. Extra funds were added to the wages estimation to allow for fluctuations based on peak seasonal times where more staff may be required. Fixtures and fittings are estimated at €50,000, an estimate based on advice given by James Byrne, the manager of The Bistro Pub and Grill in Gorey. The fixtures and fittings include tables, chairs, plates, cutlery, painting etc. The property is fairly up to date but will require some renovations to get it to the high standards our customers will come to expect. These renovations are estimated to cost €100,000. 1.3 'Financing' of the capital/set up costs and working capital associated with the project.'' Each of the three partners is to invest €20,000 and a further loan will be taken out to the value of €107,000. This loan accrues interest as follows: Year One- 5.5% Year Two- 6% Year Three- 7% Year 4 Plus- 7.5% '''1.4 'The research and justification of the operating costs associated with the project for the first year in operation classified into fixed and variable elements. Fixed Costs include in €: Nine months’ wages 133,907 Rent 65,000 Depreciation on fixtures and fittings 5,000 Light and heat 2,500 Insurance 8,200 Loan interest 5,885 Total 220,492 Wages is calculated as previously discussed in 1.2. Three months’ worth of this wage is included in the working capital and the remaining nine months are considered a fixed expense. Rent for the property was estimated by BRIANNNN . Depreciation is calculated at a rate of 10% over 10 years. An insurance quote was estimated by KIMMM Loan interest is the year one rate of 5.5% interest on the loan of €107,000. Variable costs include in € Variable costs have been estimated at 35% of sales. This figure is estimated on an average of the estimated variable costs from three similar establishments including; Style Restaurant, Blackrock, Dublin. Manager- Gina McKenna The Bistro, Gorey, Wexford. Manager- James Byrne The Winter Garden, Naas Road , Dublin. Manager- Jason Bailey 1.1 'The Research and Justification of Revenue Pricing ' ' ' A paper submitted to the European Commission estimated that the average daily footfall in Temple Bar is in the region of 50,000 with a turnover in excess of €600 million. This location is highly conducive to high volume of sales. A survey was carried out by Declan Coyle, a partner in The Brooklyn Revolution. Declan watched the footfall in a similar establishment in Temple Bar from 12:30-13:30. In this time, He saw 51 people enter the restaurant. He approached some of the customers and those who responded indicated that their average spend was between €10 and €15. When asked what they would spend on a similar visit at night time, the average was said to be between €15 and €30 depending on whether alcohol was to be consumed. A more relaxed survey was carried out by Brian Nixon in a very similar establishment in England, the chain Weatherspoons, having a similar business plan to that of The Brooklyn Revolution. The findings indicated that the average spend there was between £10 and £35 depending on the time of day. It was said that capacity (in this case 200) was reached several times a day. While there are too many variables between tis restaurant and our own to actively utilise their figures, it shows that there is a demand for such an establishment. To this end, the average spend per customer is estimated to be €15. It is estimate that in the first The Brooklyn Revolution will see 90,000 customers which, allowing for holidays comes to 250 customers a day. This figure is thought to be achievable with an aggressive online marketing campaign, alongside our long opening hours and pre-drinking offers. The Brooklyn Revolution will offer a variety of meal deals and drinks offers to encourage spending , meaning the €15 average should be very achievable.